It should be a good year for preferred stocks, according to UBS. The securities, some of which yield close to 7%, are a hybrid product. They trade on exchanges like equities but have par values and pay income like bonds. When the value of a preferred stock rises, yields go down. “Preferreds are off to a strong start to 2024,” said Frank Sileo, senior fixed income strategist for the Americas at UBS. Preferreds typically have a fixed par value of $25, but they are also available in $1,000 par value. The $25 par value preferreds have seen a nearly 3% return year to date, he said. Preferreds are sensitive to interest rates. The securities have either a very long maturity date or no maturity date, but typically have a call date — which is when the issuing company can redeem them. While the Federal Reserve is expected to start cutting rates this year, the central bank has indicated it isn’t in a rush to do so . The yield on the 10-year Treasury has moved higher in recent weeks, as traders push back their expectations for when those cuts may begin. “We expect generally lower-trending interest rates to support the sector and produce solid 12-month returns,” Sileo wrote in a note last week. “However, valuations have tightened, and coupled with our expectation for near-term rate volatility, we could see a near-term pullback,” he added. Longer-term, he projects returns in the high-single digits for 2024 — or possibly higher. “Double-digit returns are possible especially if the economy continues to slow (and then stabilize) without triggering a significant, spread-widening credit event,” he said. Here are some of UBS’s top picks in the preferred securities sector with moderate risk.